Buy Tata Metaliks; target of Rs 675: ICICI Direct

Buy Tata Metaliks; target of Rs 675: ICICI Direct

ICICI Direct is bullish on Tata Metaliks recommended buy rating on the stock with a target price of Rs 675 in its research report dated October 22, 2020.

ICICI Direct’s research report on Tata Metaliks

Tata Metaliks (TML) reported a healthy set of Q2FY21 numbers. Pig iron reported sales volume of 85684 tonnes, up 12% YoY 167% QoQ. Ductile iron reported sales volume of 48908 tonnes, up 80% QoQ but down 13% YoY. The YoY decline in sales volumes of ductile iron pipe was on account of delays in project sites arising out of Covid impact. The company reported a topline of Rs 520 crore, up 2% YoY and 148% QoQ while EBITDA came in at Rs 109 crore vs. Rs 41 crore in Q2FY20 and Rs 10 crore in Q1FY21. EBITDA margin came in at 21.1% compared to 8.0% in Q2FY20, 4.9% in Q1FY21. Ensuing PAT came in at Rs 82 crore, up 248% YoY.

Outlook

We value the stock at 6x FY22E EV/EBITDA and arrive at a target price of Rs 675. Hence, we assign a BUY rating to the stock. Key risk to our call is a significant increase in raw material costs and lower-than-expected increase in demand for DI pipes.